Keep reminding yourself that “Cash is King”
Article by Mike Anderson (NSBC Founder & CEO)
Cash flow is the lifeblood of every small business. The daily pressure of doing business is challenging enough, however this type of pressure is generally positive. A cash flow crisis is negative pressure. It will eat away at your positivity, slow you down in the productivity department, and in simple terms, financial pressure is destructive.
Make a commitment to free yourself now from money worries and get your cash flowing again so you can create the business you have always dreamed of.
Here are some quick things you can do to improve your cash flow today:
1. Keep reminding yourself that “Cash is King”: Manage it with the respect it deserves
It’s very unforgiving if you don’t. Remember: cash is king because no cash means no business. Never run out of cash. Running out of cash is the definition of failure in business. Make the commitment to do whatever it takes so it doesn’t happen to you.
2. Know the numbers all day every day
What is your cash balance right now? Who owes you money and how much? What do you owe to your creditors? What are your sales figures today? It’s absolutely critical that you know exactly what your cash balance is, as well as all the key numbers in your business. Ensure that you have an effective accounting system so you can produce these statistics anytime you need them.
3. Be the rainmaker in your business
Sales is everything – if you have an abundance of sales, cash will flow and if cash flows you can fix anything in your business. To improve cash flow problems, you must make it rain. As the rainmaker in your business, you will seek out, secure and retain big clients, bring in big money, and conclude big deals.
4. Smash your customers expectations
Eliminate your cash flow worries so you are free to do what you do best, i.e. managing your customers and building your business. By giving your customers your best they will also tend to pay you first. Build a sound relationship with your customers and the key people within your customers business, not only the key person that makes the buying decision, but also the key person that pays the accounts. The best way to improve your cash flow is to get your customers to pay you quickly.
5. Invoice promptly and correctly
Avoid invoicing customers only at the end of the month. Instead of waiting to invoice, invoice right away. Also, ensure that the invoice details are correct. Your customers will often only advise you of an incorrect invoice some time down the line. This can result in lengthy delays in you receiving money that is due to you. A key tip: once you have sent the invoice, make a call and send an e-mail asking for confirmation that they have received the invoice and that the invoice is 100% correct.
6. Ask for partial payment up front
Instead of waiting to invoice until a job is completed, ask for a percentage of the invoice to be paid up front. This is common business practice and one you should capitalise on, if you can.
7. Incentivise your customers to pay you quickly
Once you have successfully completed the job or delivered the service etc. the money owed to you should be in your bank account. You can get some customers to pay immediately by offering them a quick settlement discount if they pay within a certain period of time. A discount between 2 and 5% for paying within seven days will give your cash flow a healthy boost.
8. Review your age analysis daily
Review your debtors daily and identify accounts that are late paying or overdue. Then make the phone call or send out the letter or email requesting payment. Some customers just need reminding.
9. Stretch the payment of monies owed
Check your suppliers’ payment terms and determine when payment is due (30, 60 or 90 days). Then wait to pay until whenever the due dates are, rather than paying right away. Timing your business’s supplier payments will help keep your cash flow flowing, as it will keep the cash in your business longer.
What is the main cause of cash flow problems?